Cars have long been one of Jarri Sandström’s passions. In fact, E.ON UK’s HR director admits that he’s had no fewer than 60 of them. “Now I will continue to have a car, but it is no longer a passion,” he says. “I have a BMW7 series but I will have to change to a BMW1 series because of the emissions. I have to walk the talk.”
Sandström’s reluctant sacrifice gives a flavour of the soul-searching currently going on at E.ON, the world’s largest privately owned power company, sponsor of football’s carbon-neutral FA Cup – and the single largest CO2 emitter in Britain. The process is not proving easy, but Sandström, who joined E.ON UK five years ago from the group’s Swedish business, says it is being led from the very top of the organisation.
“We understand that as a company we are polluting the environment and as individuals all of us think this is not really great,” he says of E.ON’s UK board. “We asked ourselves: ‘What is it that keeps us awake at night? What do we want to accomplish as individuals?’ We want to be able to say we made a positive contribution if our grandchildren ask what we did for the benefit of society.”
An exercise last September asked E.ON’s top UK managers to come up with ideas for tackling climate change issues within the organisation. One of their many suggestions was that none of the company’s employees, including its directors, should have a company car emitting more than 165g/km of CO2. Bye bye, BMW7 series.
To reduce emissions from all business travel, including commuting to work, employees can work from home for part of the week if operations allow. Travel between sites for business meetings is discouraged, with video, web and telephone conferencing facilities set up to provide alternatives. Car-sharing, public transport and bicycle use are all encouraged, and there are special parking spaces reserved for people who share cars. Staff can also choose hybrid technology company cars.
In addition, satellite navigation and speed restrictors are used to help the company reach both health and safety and environmental targets. “We will continue to have businesses in different locations and travelling needs to happen,” Sandström says. “What I envisage is that there will be a better balance and we will try to understand when it is really needed, or if it can be done in another way.”
There are a number of other internal initiatives aimed at reducing E.ON’s “non-operational” carbon footprint – that is, the amount of energy used and emissions produced from day-to-day activities, rather than from the direct production of power. These initiatives range from using electricity only from renewable sources to power E.ON’s workplaces, to switching off computers and lights at night and recycling. The company is piloting the use of software that shuts computers down automatically when they are not in use, and it is anticipated that this will save £150,000 a year in electricity costs once it has been installed in around 80 per cent of its 17,000 PCs later this year.
These measures are helping E.ON to meet the target it set itself in 2005 of reducing non-operational carbon outputs by 10 per cent year on year. In 2006, energy use dropped 15.5 per cent per employee, although the overall figure of 32,863 tonnes of CO2 produced by non-operational activities was up on the previous year because of an increase in the number of employees in the UK. The challenge is to find other ways to meet the ongoing reduction targets, once any obvious savings have been made.
Working with environmental group Global Action Plan, E.ON UK has internally recruited volunteer “green champions” – 375 of them – to be trained to carry out environmental audits of each business area and to help educate people on how their own behaviour can make a difference. An accompanying campaign, entitled “Saints and Sinners”, includes an interactive demonstration that helps individuals to calculate their personal carbon footprint and see how environmentally “sinful” they are.
“One of the successes of the scheme is that – because it is run by local site-based volunteers – the solutions adopted reflect the challenges facing that particular site,” says Sandström. Five “flagship” sites, including Westwood, E.ON UK’s headquarters in Coventry, have now been re-audited to determine the extent of the scheme’s effectiveness, and the project extended to 28 larger company locations.
These initiatives are part of a much broader strategy launched in 2006 with the aim of transforming the entire organisation into an energy company fit for the 21st century. “Changing Energy”, as the strategy is called, recognises the threat of climate change and places the pursuit of cleaner energy at the heart of the company’s purpose. It was recently updated to take the company through to 2020 by planning for a range of possible energy production scenarios, including domestic microgeneration, greater use of renewables, biomass and carbon capture power stations, as well as nuclear power – if the government gives the go-ahead for new investment in this controversial option.
HR’s part in this long-term strategy is still under development. However, Sandström says the challenges are about engaging people through thought leadership and providing “tomorrow’s people to deliver tomorrow’s business”. “We are at an embryonic stage of how we are going to meet this challenge,” he says.
Sandström’s focus is on four “enablers” that will support change. These are leadership excellence, skills and behaviours, operational excellence and “living the brand”. One of the leadership initiatives launched since 2005 has seen around 80 per cent of senior managers going through a programme that invited leading environmental thinkers to challenge the board and stimulated debate on the development of “green” initiatives. The company is shaping its learning and development activities for 2008 around the Changing Energy principles, with the aim of getting employees to promote and “live” the changing E.ON brand in their dealings with customers, and encouraging behaviours that support the strategy. So 360-degree feedback tools are being changed to incorporate new values and behaviours, and around 1,000 senior managers are going through a psychometric evaluation to identify the leadership skills the organisation will need in the future.
E.ON UK’s approach to performance management and reward has also begun to change. In 2005 a new performance management system entitled Achieving My Potential (AMP) was introduced to provide a system to tie yearly objectives to organisational strategy. Some 90 per cent of staff are now appraised using this system, with individuals setting themselves objectives that meet their managers’ goals, which in turn build on the Changing Energy principles. This year the company will be introducing a balanced scorecard to measure success in making this strategy happen.
“Reward in the past was by increments, not objective setting,” explains Sandström. “With AMP there is transparency all the way up to [chief executive] Paul Golby’s objectives. That makes a huge difference. Before, there was no possibility of coaching to achieve objectives and no measurement of whether they were achieved or not. Individuals now have tangible targets and reward is built on performance.”
Sandström sees the biggest challenges ahead as defining, developing and recruiting the skills needed both for the technology side of Changing Energy and for the new emphasis on customers. He points out that the company has traditionally been very task-focused, but this is now shifting towards a focus on competence that includes behaviours and values, as well as skills. He expects people in future to join the company for value-driven reasons. But he also admits that there may be people who will leave for such reasons – for example, if the company invests in nuclear power.
“We looked into how we would look different in 2020, if we have nuclear or further development of renewables and so on,” Sandström explains. “We have been looking into all these scenarios to see what skills we would need and how many of these kinds of people we would need to recruit. A lot of people will work on to become tomorrow’s people. The biggest challenge is that you don’t change people and culture overnight and you can’t change anyone by telling them. That’s why the engagement concept is so important.”
E.ON expects to recruit thousands of people before 2020. The current recruitment rate is about 3,000 a year because of a high churn rate in the company’s 18,000-strong UK workforce. So Sandström is looking to be more selective and focus not only on people with the right engineering skills but also on those with a strong commercial sense and a capacity for innovation and creative thinking. He also cites customer orientation, entrepreneurship and teamwork as vital for the future of the business. “People now have a lot of drive but it is task-oriented to produce more of what we do today, and perhaps that’s not the right thing,” he admits. The HR team is using a talent mapping process to identify both the skills that already exist in the company’s management population and those that will be needed in future.
E.ON has also invested in outreach initiatives that include school projects allowing young people to work directly with E.ON engineers, a young apprentice scheme launched in October 2007 to help build a pipeline of future engineers, and a programme (Women into Engineering) to give girls hands-on experience of engineering work, such as jointing cables. The company has developed a range of school resources on energy, and in March 2007 set up the E.ON Engineering Academy in partnership with Aston University and Walsall College of Further Education. This will eventually train all craft staff and engineers in E.ON UK.
Graduate recruitment is being stepped up, too, with the intake almost doubled over the past three years, and £5 million going into operational training. Sandström says that E.ON currently struggles to recruit and has to put a great deal more effort into the process than companies with brand products that sell themselves. His aim is to construct an employer brand that is also a customer brand for E.ON, and will make the organisation an employer of choice.
“I think the Changing Energy agenda will help us differentiate ourselves in the market to customers and employees,” he says. “I believe the future will make it clear to people that the energy business is really an exciting place to be.”
People will be central to E.ON’s transformation. But Sandström believes that change will be organic, with leaders showing the way. “We are not here to tell people [what to do] or police them or watch over their shoulders,” he insists. “People are not stupid: they are bright and will do whatever they can to make this happen so long as we provide them with the tools and structure. We are trying to build a learning organisation.”
Although some employees are further along the green path than others, there is greater environmental awareness within E.ON than in society as a whole, according to Sandström. He claims that the company’s internal green programmes have proved very popular.
Certainly, despite controversy over some of its plans for new power plants and the nuclear issue, the organisation appears to be engaging in the climate change agenda with some seriousness. As Sandström says: “As a company we have to do this, not only because we believe it is right, but because we are a business and we need to survive, and if we don’t, we won’t survive. It is that simple.”
Facts about E.ON
• E.ON AG is number 53 in the 2007 Fortune Global 500 list.
• The German-owned company has around 18,000 staff in the UK, with 80,000 in total.
• It emitted 27.5 million tonnes of CO2 from power generation and 32,863 tonnes from non-power generating activities in 2006. The energy sector as a whole produces 30 per cent of UK emissions.
• Carbon intensity – the amount of CO2 produced per unit of energy – has gone down 20 per cent since 1990, with a further 10 per cent reduction planned by 2012 on 2005 figures.
• 70 million miles a year are travelled by E.ON vehicles.
• 2 per cent of E.ON’s output is from renewables.
• €6 billion (£4.5 billion) of a group-wide investment budget of €60bn to 2010 will be spent on climate and renewables. E.ON is part of a consortium building the Thames Array – a massive offshore windfarm in the Thames Estuary.
• Consumer initiatives include combined heat and power, microgeneration technology, advice and assistance on insulation, energy-saving devices and measuring energy use to encourage saving.
UK targets
• The 2003 energy white paper set a target of a 60 per cent reduction in CO2 emissions in the UK by 2050.
• The government’s “renewables obligation”, requiring energy companies to source electricity from renewables, was 5.5 per cent in 2006 and will rise to 15.4 per cent by 2015.
• For more on the government’s energy policy, visit www.dti.gov.uk/energy